Holiday prices will be "dramatically higher" next year, according to Ryanair boss Michael O'Leary, who predicts demand to sky-rocket but supply to be reduced.

"I think there will be a dramatic recovery in holiday tourism within Europe next year," the airline's CEO told the Sunday Times. "And the reason why I think prices will be dramatically higher is that there’s less capacity."

“Take out Thomas Cook (6 million seats), Flybe (8 million seats), Norwegian (nearly 24 million seats) — Alitalia’s reducing its fleet by 40 per cent. There is going to be about 20 per cent less short-haul capacity in Europe in 2022 with a dramatic recovery in demand.”

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Thomas Cook and Flybe have both gone bust in recent years, while Norwegian announced this year it was selling off some of its fleet, cancelling orders of new planes, and stopping all long-haul services.

O'Leary said Ryanair would cut prices this winter to “grab market share everywhere”, but he predicted price rises next year. He said this would lead to more consolidation, after Easyjet rejected a takeover bid from Wizz Air.

The government is expected to announce this week that the requirement for travellers to take PCR tests is to be dropped in favour of the cheaper - but less reliable - lateral flow tests. Reports on the weekend said the rule change would apply to amber and green list countries only, and that it would come into force before the October half-term.

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